How To Evaluate Market Demand For Your New Product Idea
Over the last few weeks we've been posting a series of articles to help you figure out what to sell online. In our first post in this series, we learned eight strategies for finding your first product, in the second post we discovered 10 places entrepreneurs go to find product ideas, finally in our last post, we shared 10 product ideas that are currently trending.
Let’s say you've implemented the advice from our previous posts and you've come up with a few of your own ideas. How do you go about evaluating those ideas and determining if there is potential to build a profitable ecommerce website around them?
In this article we evaluate the potential demand for a product we choose from the previous post, look at niche opportunities that exist around it and get an idea of demand for that niche.
Validating an idea or product is important because it helps you get a sense of the potential market or, lack of market, for your product idea before spending a lot of time and money on it.
In our last post we looked at Google Trends to see how the products were trending. Google Trends is a good start but only tells you a small sliver of the story. If there was one person searching for a product last year and 10 people this year searching for it, the trend is increasing but the market is still insignificant to enter as a business.
Note: Although we always recommend validating your product, we recognize there are many successful online businesses created by entrepreneurs that just went with their gut or that created demand where no demand existed prior. No single approach is appropriate for every person, product and business. We recommend you decide what you think is best for you. All validation tactics are done to build confidence before investing your time and money. There is no single test that can give you an answer, rather it’s a combination of everything, including your gut feeling, you should rely on.
Market/Demand Evaluation vs. Product Evaluation
In this post we're strictly going to be conducting a market based evaluation to get a better idea of potential demand and competition for coconut oil. In our next post, we'll be conducting a product-based evaluation, which will focus on the viability of the particular product including potential margins, restrictions and regulations etc.
Out of the 10 products we looked at in our last post, we’ve decided to choose coconut oil as a product to further validate. We picked coconut oil partially because it seemed like an interesting and versatile product but also because when we compared all 10 trending products to each other, coconut oil by far had the greatest search interest. We determined this was the best start point.
*Note that Google Trends only allows you to compare up to five products at one time, but we did check all of them.
Where It Began
If you remember from our last post, we originally discovered coconut oil as a potential product when we came across a Pinterest pin on 30 ways to use coconut oil.
With 934 re-pins and 105 likes, it seems that this is a popular product. However, this is just one pin on Pinterest. We need to learn more to know for sure.
Let’s take a look again at Google Trends to see if in fact coconut oil is trending upwards, how big the trend is and when exactly it began.
Looking at “Coconut Oil” in Google Trends, we can see that the trend and popularity for coconut oil exists, increasing dramatically since approximately 2011.
To further validate the popularity, appeal and usefulness of coconut oil we decided to look at some product reviews. On MakeupAlley, a review site for all types of skin and haircare products, coconut oil had an average rating of 4.5 stars out of 5 based on 834 reviews and 90% said they would purchase it again. Very favorable feedback for the raw ingredient.
Although we didn't find much in the way of negative comments for coconut oil, looking at negative comments in reviews can help you find deficiencies in current products that you can capitalize on. Read: The Amazon Whisperer.
So now we know that coconut oil is indeed trending and people are purchasing it. However, the question still remains, how many people are actually interested in coconut oil?
To take things one step further, let's look at “Coconut Oil” in Google’s Keyword Planner Tool. The Google Keyword Planner Tool allows you to search for keywords to determine how many searches per month are being made for that term, how much competition there is competing for it and related search terms.
To use this tool you need to have a Google Adwords account which you can sign up to for free. Login to your account and select Tools from the top menu, then select Keyword Planner. On the next screen, click Search for new keyword and ad group ideas.
On the next screen enter your product idea. Double check your settings under Targeting to make sure they're to your liking, in particular the locations you want to target.
On the next screen, it will be on the default tab Ad Group Ideas, change that to the tab labelled Keyword Ideas.
The first column will list the keyword you searched for as well as the various search queries related to the keyword you entered. The second column shows you the number of searches being performed each month in the geographic area you specified. The third column is the level of competition for each keyword.
After looking through the results, a few things stood out, noted below:
As we already knew from the original Pinterest pin, coconut oil has many uses. From the keyword planner though, we can see uses for hair, skin, recipes, dogs and face. Going through the full list uncovered even more.
The main search term “Coconut Oil” has a lot of search interest. 246,000 searches per month in the USA and Canada. Unfortunately, it also has high competition. This means that there are a lot of other people already advertising and competing for that particular term online, making it more difficult for you to compete effectively.
There are many other search terms that still have high search volumes with less competition. That roughly translates into opportunity.
Filtering out the keywords with high competition, it appears there's still a lot of keywords with high search volume that are less competitive. Noticing a few of them had the word “hair" in them, we created a new search for “Coconut Oil + Hair”.
Here’s what we found (Results have been color coded by competition difficulty):
The search volume for many of these terms are pretty strong and all have low to medium competition. The top term “coconut oil for hair” in particular has extremely high search volume.
What Type of Content Is Ranking in Google (Content Competition)
Let’s take a look at the largest search term, “coconut oil for hair” in Google to see what type of content is currently taking the top spots. This will give us a better idea of what we would be competing against.
We can see from this Google search that almost all the top 10 positions on Google for the search term “coconut oil for hair” are one-off articles. There doesn’t appear to be any one person, company or domain that is dominating for this search term. We found similar results when we searched for the other keywords as well.
This means that if you were to try and compete for this term, your chances of ranking high in Google is much greater than if you were trying to outrank established major brands or businesses.
Overall things looks extremely positive. We know that there's likely opportunity with a coconut oil product for hair. Exactly what type of products or niches can this be turned into though? To get a better idea of products, we went back to the original Pinterest pin that started it all. Following the link through to the website, we took a look at the 30 ways to use coconut oil. We did a search to highlight the term “hair" to see how exactly coconut oil can be used for your hair.
What Type of Content Is Ranking in Google (Content Competition)
It turns out that four out of the 30 uses for coconut oil were for some type of hair treatment, including taming frizz, conditioning, deep treatment repair and removing gum from your hair. Each one of these is a potential product opportunity.
We know that people are searching for coconut oil information and products for their hair but who are these people? Sometimes products and trends can be very specific to a geographic region. We need to make sure that the people that are searching for the terms we discussed previously are living in a area that we're able to sell and ship to.
Social Media Validation
We already know coconut oil is pretty popular on Pinterest, after all, that's where we discovered it in the first place, however, there are other channels we can use to get a better understanding of the market and demand. Twitter is an effective source for looking at market potential and product interest. We used Topsy to search for the volume of tweets per day mentioning the words "coconut oil", and "hair" in a single tweet.
Social Media Validation
From the Topsy graph we can see that everyday approximately 150-250 people are tweeting our keywords. To get a better sense of what exactly they were tweet about and the sentiment of their tweets we also did a search on Twitter.
Here were just a few examples that in particular, hinted towards buying intent:
I need to get some virgin coconut oil for my hair!
11:28 AM - 31 Mar 2014
coconut oil is EVERYTHINGGGGGGGGGG “@Bad_From_MiBorn: I need to get more oil for my hair. I'm scalp is super dry”
— // (@yoimanj) March 29, 2014
Lizelle Wait @lizelleWait
@HeyGorgeousSA Coconut Hair Oil Treatment For Gorgeous Locks..Really need this for my dry damaged hair,my hair falls out allot
5:05 AM - 3 Apr 2014
Dianara Moore @realdianarangel
Hot coconut oil worked wonders on my long hair!!! It's sooo shiny & soft already. No need for salon. Try it at home! ??
2:37 PM - 30 Mar 2014
Retweets 1 1 like
Using social media to research your product not only reveals the volume of conversation surrounding your product idea but it also helps you discover the language your potential customers are using. This can be helpful when creating ads or writing product descriptions down the road.
From our analysis, there are three areas of competition in the coconut oil hair product market.
Pure Coconut Oil - Pure coconut oil is the main ingredient and from our research, does a great job on its own of moisturizing and repairing hair. Pure coconut oil is readily available online and locally.
DIY Coconut Oil Recipes - Do-it-yourself recipes are available online. All recipes obviously include coconut oil as the base ingredient, but also combine various other ingredients to seemingly improve the effects of the final product or to help change it’s core function/texture. For example, hair treatment/conditioner vs. hair mask.
Commercial Coconut Oil Hair Products - These are products produced by businesses large and small and contain a proprietary blend of ingredients to create a unique and perceived better final product.
Overall market demand appears to be fulfilled maybe even saturated with the various types of coconut oil products available online. However, as it relates to commercial products, there doesn’t appear to be any one product or brand that is dominating the market.
What We Learned
When we started, all we had was a product idea that we got from Pinterest.
With a bit of research and using free online tools we were able to find out quite a bit about demand potential of coconut oil. From the Pinterest post we knew coconut oil had many uses. By using Google’s Keyword Planner, we were able to uncover several search terms with low to medium competition and high search volume. It was these search terms that lead us down the niche path of coconut oil for hair applications, including a hair conditioner, hair mask, deep root conditioner and frizz taming.
We learned from Google Trends that coconut oil for hair is trending and has been since approximately 2011. We were able to identify the countries and even the specific cities that are searching for our potential keywords.
The Google Keyword Planner told us that there are at least 74,070 searches in the US and Canada by people looking for information or products related to coconut oil for hair every single month. Moreover the keywords that are being used don't have a lot of competition so there is potential to rank well for them in Google over time.
In Topsy we learned that there are approximately 250 tweets every single day that are talking about coconut oil as it relates to hair. Looking at some of these tweets directly, we can see that many of these people have buying intent for a coconut oil hair product.
We now have a much better understanding of this potential opportunity. We've seen some very favorable results in regards to potential demand and we've uncovered some great keyword opportunities. All of this so far looks great but we’re not ready to call this yet. In the next post in this series, we're going to carefully look at several product-based criteria to get an even better understanding and gauge of this product's potential.